Tuesday, July 24, 2007

Listen to the Professionals!

Let me start out by saying: I don't know this guy from Adam. He might be the best darn loan officer in the country, for all I know. But while I was reading this Realtor/Loan Officer's post, I was reminded of all the people who have to INSIST that you trust them. It's been my experience that trust is earned, not demanded. Anyhoo, following is one (angry!) excerpt from his blog (plus a wee bit of commentary from me) and at the end I have a mortgage question.

"This is something that comes up in just about every real estate transaction I take on and it never ends up well for my client ... It has more knowledge about your real estate transaction than you or the licensed professional you’ve hired to handle the job. It can be a family member, a coworker, a friend! ... No matter who it is, they all belong to the same group: The Infectious Idiots! The Toxic Talkers! They’re like the wolf in sheep’s clothing only these wolf’s [sic] are disguising themselves with knowledge...

"Nicole Richie is walking around with an alcohol bracelet on her leg [NOTE: "bracelet on leg" = "anklet" also: Does he mean Lindsey Lohan?]. If she drinks, the bracelet's going to tell her how drunk she is by measuring her sweat or something weird like that. What I wish the genius scientists would come up with is a BS Bracelet so that anytime you uttered some total BS is would shock you! And not just a little shock, I’m talkin’ a take down, I saw it on Cops, Tazer blast of electricity that would leave no doubt in the minds of those you were talking to that you have no idea what you’re talking about..."

I love that in the middle of his rant about people who have no idea what they are talking about, he gets the Nicole Richie bit wrong. I also love that he wants people stunned with an electronic pulse for this very offense. But back to the anger:

"Let me give you an example of how this type of venomous verbalization hurt one of my clients this past week. I was hired to refinance a loan for someone and everything was going great. In one scenario I was saving my client nearly $500 a month. That’s $500 less that they would have to be writing checks for every month. $500 extra in their pocket each month. I thought it was a pretty good deal but, just as everything was falling into place, my client consulted a friend..."

Notably absent from this post is how much it will actually cost the beloved client to save this $500. But back to the rant:

"Well, the friend tells my client that he just got a loan and it only cost him $1,000. I explained that there is no way that I can do a loan for $1,000. It’s not possible ... For one, and this is most important, I don’t work for free. You don’t work for free, so why would you expect me to? I’m a professional. I do a great job and I earn every penny I make. If you want my services, this is what it’s going to cost. If you went through life choosing to hire only those who cost the least, do you really think you’d be getting the best service, the best advice or the best products? Not a chance. A loan for $1,000? ... I can charge you nothing to do the loan, but your interest rate is going to be significantly higher. For the life of the loan. That’s the way it works."

Well, maybe I'm naive, but couldn't the client just go directly to the lender?

"Let’s say the loan is for $400,000 and I was charging 1 point. That’s $4,000. It’s a one time cost and it can be added to the loan amount so that there’s no money out of pocket.

I guess he means "no cash up front" because if you are adding that to the loan amount you will be paying cash "out of pocket" for the next 30 years to cover his fee.

"Let’s say I get you an interest rate of 6.50%. Your monthly interest only payment on $400,000 would be $2,166. Well, if you don’t want to pay my fee of $4,000, I can do that. I can get paid directly from the lender. The only downside is that you’re going to have to pay for it with a higher interest rate on your loan. Let’s say that in order to get my fee of $4,000 from the lender your interest rate would have to be 6.875…6 and 7/8’s…that’s for the life of the loan."

Can somebody explain this to me? Why can't the client get the same rate directly from the lender? Pay the point directly to the lender?

5 comments:

James said...

Hi kate.

long time reader, first time commenter. You are correct that the client could go directly to the lender especially if the broker told the client where those rates are offered.

the reason some people go to a broker is because the bank won't fudge the numbers for them and the broker will. somebody with good credit will almost alwyas be better servied going directly to the lender.

Banker GIrl said...

James,

If a broker has a high volume of clients, the broker may be offering a better rate than the client could get directly from the bank as an individual.

It's like if you are buying wholesale you get a better price than if you are just buying one.

blackrose said...

"I also love that he wants people stunned with an electronic pulse for this very offense."

That made me laugh soooo hard!!
As far as I know, Nicole Richie is pregnant, I seriously doubt she's wearing one of those alcohol anklet things, if she is, I pray for her child.

ProblemWithCaring said...

Kate,
Man, You should really meet my aunt. She's a broker with her own band of shiest-y loan officers, escrow reps AND inspectors.

She's a one-woman show in selective "mistruths".

The Cult of professionalism is the last refuge for California realtors...

TrustEarner said...

Kate:

You *could* possibly get a better overall deal on the loan if you go direct to lender and end up with a competent, ethical, knowledgeable salesman. Possibly. But you are still going to be compensating the salesperson, as you would the broker. The difference is that if you go with a broker that recognizes their duty to the borrower, you will have a much much better chance of getting a good deal than you will if you go direct to bank and pay retail. Check out www.upfrontmortgagebrokers.org.
The way they work, they provide a DISCLOSED markup to wholesale, and they have NO incentive to put you in a more expensive loan. (disclosure... I'm a "UMB"). We need to toot our own horn because hardly anyone understands how we work or why it's to their benefit.

James: Baloney. Qualify that statement... it's either a lie, or grossly uninformed.